October 8, 2010 by staff 

Qe2, Dame while inflation of age. Dame while inflation of age. Dame while inflation of age, is good enough for me. The Federal Reserve has changed sides! Can you believe the Federal Reserve is in favor of inflation! I mean it’s like Superman encourage the Communists. The mission of the federal “has always been to fight inflation, not create it. But that’s exactly what they are doing. Of course, the truth is that regular readers of my reports have been known for years that the Fed inflationary joined the dark side of force. The Fed wants the commodity prices to inspire economic activity begin to fear that their activity is used or lost in relation to the purchasing power of their devalued dollars. The Fed wants inflation and know how to create and can not get in the way federal agencies.

It’s like I wrote the day after the quantitative easing March 1, 2009 when he said: “I fought the Fed and the Fed won. I fought the Fed and the Fed won. Money required for some prints, I fought the Fed and the Fed cattle. “I say,” Do not underestimate how the central bank can change the market. ” Fed time of this movement to quantitative easing market still has to come to grips with the effects of short and long term on the economy and markets. The only thing that is certain is that the rules have changed. And when it comes to a knife fight and the power of the Fed, there are no rules. Someone say one, two, three, gold! In a blink of an eye the Fed, with its unlimited power to print money, you can change the dollar value of a product or its long-term trend in an instant. In creating inflation and the money nothing can reverse the trend of commodity over as we know it and drive out demons deflation that particular time. Being short commodity has become a more dangerous and the Fed has put us on notice. At any time you can run the printing press and change the destination of goods.

They do not because it created a worldwide shortage of a product or due to soaring demand. It’s because the Fed has the ammunition to do so. At the same time, the Fed’s policy of quantitative easing is the simulation for the economy as a good old-fashioned cut interest rate, but at the same time, has the potential to be more inflation (especially commodities) . And now that the Fed has opened the Pandora’s box, from markets and now have a more complex element of them. Not only that the market seemed a bit surprised by the timing of the Fed of this historic and dramatic. Not that the market was on guard for the possibility, but after an Emmy, Ben Bernanke, is winning caliber performance in 60 minutes, the idea was that this silver bullet relief would be saved for another occasion. Is there an award for best actor for a president of the Fed and a cheerful disposition in a continuing role?

I asked at that time Why QE? There are two possibilities. One is that the economy is much worse than it looks. The other is that the Fed thinks things are getting better and wanted to give a little shock and awe stimulation of this weak recovery in the hope that it will become a full blast of unbridled economic growth. Inflation may be acceptable when it comes to economic growth. Fed’s bet is that this will stimulate the economy, eliminating the risk of deflation and reduce yields for mortgage companies and moving again.

The problem is that if we grow beyond the inflation risk, you get the dreaded stagflation. The fear is that the movement of the Fed may not be sufficient or simulation will not have the desired effect. For commodities and oil, if this is just a game of inflation, this is not good. If the oil is driven more just because the Fed is printing more money compared to the improvement in demand, as the Fed can actually damage the economic recovery. If the dollar continues to fall against other major world currencies, the Fed is in the same position weak dollar, which complained about earlier in this crisis. In other words, if the inflationary effect of oil is greater than the effect of economic stimulus of lower long-term, oil drag on the U.S. economy goes to the dreaded stagflation scenario.

Stagflation is a real danger for the Fed and its endless array of money. This is the largest federal commitment. It’s like their version of the surge in Iraq. It is make or break your time. If printing money can not change the direction of this economy, then leave the wheel barrel to fill with cash and try to open your portfolio in gold. If it works and the economy starts to grow, the Fed will have to put on the breaks and raw materials will fall. If the products remain strong and recovery will not keep up, then prices will start to fall again. That is until the Fed starts printing again. Now that the Fed is getting ready to print again and QE2 may be just around the corner!

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